Targeted for FINRA’s most recent “sweep” requesting nearly 5 years of your info by November 15th?
It’s a fact of life for everyone in the financial services industry. Periodically, FINRA and other regulators conduct targeted exams, known as sweeps, to gather information and carry out investigations. The regulators use “sweep” information to focus examinations and regulatory response to emerging issues.
“Swept” firms are selected based on such factors as the level and nature of business activity in a particular area (lots of activity makes you a bigger target), customer complaints and regulatory history, as well as your firm’s prior examination findings.
FINRA’s most recent “sweep” or targeted exam letter released in mid-October is requesting the following information from January 1, 2011 – September 30, 2016– with supporting documents. And it wants you to submit it all no later than November 15th, 2016.
This is a BIG “request”
FINRA wants you to respond to (with documentation) 15 different demands for information on your:
- Cross-selling programs (an ongoing ripple effect of Wells Fargo).
- Content and method of communication to employees of information regarding cross-selling programs.
- Monetary and non-monetary benefits to employees related to cross-selling programs.
- Metrics used to track and evaluate employees’ performance related to cross-selling programs and the application of those metrics to performance ratings, promotion and termination decisions.
- Employees terminated or disciplined for not meeting production goals or for engaging in improper activities related to cross-selling programs.
- Retail customers who: (1) had accounts opened on their behalf without authorization, (2) had features added to their accounts without authorization, (3) had bank products of an affiliate/parent added to their accounts without authorization or (4) were reimbursed (include the reimbursement amount) due to improper activities related to cross-selling programs. Include a description regarding how the firm identified the customers represented in this list.
- Revenues flowing to the firm from its affiliate/parent as a result of the referral of its broker-dealer retail customers to those entities or from the sale of bank products of the affiliate/parent to broker-dealer retail customers.
- Supervisory and compliance procedures, exception reports or other controls related to cross-selling programs, including those used to detect unsuitable or unauthorized sales of bank products of the affiliate/parent to the broker-dealer’s retail customers or the opening of broker-dealer retail accounts without the customer’s authorization.
- Written training materials and a description of oral training presentations related to cross-selling programs.
- Retail customer seminars conducted, or marketing materials that the firm used, regarding account features or bank products of the affiliate/parent and any funding the affiliate/parent provided for these seminars or marketing materials.
- Investor complaints, litigation, arbitrations or internal disciplinary or other actions related to cross-selling programs, including the nature of the allegation; the product, service or account type; the date the matter first surfaced; the name and CRD number of the subject employees and the status or disposition of the matter.
- Whistleblower, ethics, or other written, electronic or oral complaints (to the extent not covered above) related to cross-selling programs, including the substance of the complaints, the date the complaint was received, the name of the person (if available) making the complaint and the status or disposition of the matter.
- Escalation procedures to report, capture and respond to matters related to cross-selling programs. In addition, list those matters that were escalated and include the name of the person who raised the matter, its substance, date and status or disposition.
- Reviews by Internal Audit, consultants, law firms or other external parties related to cross-selling programs that include the date, areas covered and recommendations, conclusions and actions taken as a result of the review.
- Reviews, inquiries, reports or other initiatives (collectively “matters”) regarding cross-selling programs undertaken by the broker-dealer at the direction of its—or its parent company’s—Executive Management, Board of Directors, or other executive management or board committees, including the dates and the areas covered by the matters. Designate those matters that were initiated at any time on or after September 1, 2016, that focus on assessing whether improper cross-selling programs occurred at the firm and indicate whether those matters have concluded or are ongoing.
So, what are you doing?
If you’re reading this, it’s because you are a Broker-Dealer, RIA, or FCM concerned about your firm’s compliance exposure. You know — whether it’s trading or non-trading exposure — you must create, implement, maintain, confirm, and review written supervisory policies and procedures to ensure regulatory compliance, reduce reputational exposure and avoid related financial consequences. If you are doing the right thing, you have implemented the necessary policies and procedures. Are you?
Stuff happens. It always happens. Just make sure it doesn’t happen to you! If you don’t have the bandwidth to be your own compliance, outsource. When your compliance function is under pressure to do more with less, you have options?
Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliant data capture, file storage, and compliant records archiving specifically designed for the financial services community.